After tax season questions about what's fair and what's not fair

It seems great after tax season to get together with a group of friends who you haven’t seen for the past few months. I am sure every tax preparer feels the same way. But it becomes a bittersweet activity and going to a cocktail party right after T-Day always becomes an exercise in restraint and patience.

For instance, there is always someone who is in the mood to complain about the tax system. It seems he is one of the 49 percent who pay some income tax and starts complaining about the 49 percent who don’t pay anything. He is not too upset about the 2 percent who pay the bulk of the tax. Yet. But that subject is on hold and undoubtedly he will come back to it. Right now he is convinced everyone should pay something and if we had a Fair Tax that he heard about a while ago, that would be fine by him. A lively discussion begins and generally a crowd gathers and everyone has an opinion about taxes in general.

Then out of a clear blue sky, someone starts in on the magic words he keeps him hearing on TV. “What about the ‘subsidies’ that the oil companies are getting?” This is directed to no one in particular but I feel that since I am the only tax man in the room, it was for me to answer.

In his mind, he assumed they actually were receiving checks. I explained to him the word subsidy means financial support or a grant paid to keep prices low. Being in the business for many years, I am not aware of the government actually issuing checks to the oil companies as they actually do for farmers not to produce certain crops. The real definition of “subsidies” in tax terminology actually means an allowable deduction.

In the oil, gas and mineral industry, some of the terms that are used to explain subsidies are actually known as intangible drilling costs, and depletion. These deductions were allowed when the oil industry was just getting started back in the early 1900s and has not ever been rescinded. They are also allowed to deduct depreciation charges just as are other companies such as Microsoft, Apple and even the local contractor down the street. To equate this deduction to a personal term, it would be the same as calling your mortgage interest deduction as a “subsidy.”

This explanation calmed things down but I could see there was still some tension regarding taxes in general. We all agreed that the need for a revision of the Tax Code would be the answer for everyone. But does Congress have the nerve to do this now or ever? If we had term limits for everyone perhaps that would happen.

I am always reminded of a tax bill that was held up until the wee hours of the night so that a provision could be inserted that would benefit apple growers. It passed and this benefit went to a senator who had large holdings in an apple growing company. It now appears that these bills are not exclusively written for the average citizen but with addendums added that will benefit some legislators so it will get passed. The old adage please read the fine print could not be any clearer.

Observation: If Patrick Henry thought taxation without representation was bad, he should see how bad it is with representation.

Comments are welcome, so long as they are civil. A Facebook account is required. Abuse may result in the commenter being permanently blocked. Personal attacks are strictly prohibited. We reserve the right to remove any comments at any time.